If you're a 401(k) investor, you may well have as much money in your account now as you did in October 2007, when the Standard & Poor's 500 hit its record high.

Whew. But as you look 10 years ahead, do you really want to go through all that misery again?

Probably not. But unless you're willing to accept the returns you get from ultrasafe investments, such as money market funds, you're going to have to take some more risk. You can ameliorate some of that risk, however, by taking a few simple steps.

Whether your 401(k) is back to even depends on several factors, the most important of which is whether you continued to add to your account.

Let's say you had $50,000 in your 401(k) at the end of October 2007. You invested in a balanced fund, which typically puts 60% of its assets in stocks and 40% in bonds. Most people, after all, don't invest their 401(k) entirely in stocks.

If you'd stopped putting new money in your 401(k), you'd have about $44,000 in your account now. But let's say you put 6% of your $50,000 salary into your 401(k) each year, and that your employer matched half. You'd have $55,000 today.

By adding money regularly to your account, you also get the benefit of dollar-cost-averaging: You buy more shares when the market is low and fewer shares when the market is high.

Ultimately, the biggest factor in the size of your nest egg when you retire is how much you put in while you're working. And, while you can't control what the stock market gives you, you can control how much you contribute.

Step 2: Stay diversified.

The above example shows what would have happened if you'd invested in a mix of stocks and bonds. Had you simply invested in a fund that mirrors the S&P 500, you'd still be showing a loss, even if you'd been adding to your 401(k) plan. And if you haven't been contributing to your plan, your account would be about 25% lower than it was in October 2007. "This is not the time to forget the lessons of recent history," says Gary Schatsky, a New York financial planner.

Ideally, you want to invest in broad asset classes that don't move in lockstep with the S&P 500. Owning two large-company growth funds, for example, won't help you much when the market moves down. A few suggestions:

•Don't put more than 20% of your portfolio in international stocks. When panic hits Wall Street, it hits Tokyo and London, too.

•Not all bond funds are alike. High-yield, low-quality junk bonds, for example, tend to be more closely tied to the stock market than high-quality bonds or Treasury bonds.

•Consider a fund that invests in Treasury Inflation-Protected Securities, or TIPS, as a way to protect your portfolio against inflation. TIPS rise in value when the inflation rate rises.

Step 3: A little cash never hurts.

Nothing dampens risk quite like cash — high-quality, low-risk investments that have little chance of losing value, such as money market funds or bank CDs. Keeping 10% of your portfolio in a money market fund will reduce risk and give you some cash to invest when the market plunges.

If your 401(k) offers a guaranteed income contract, or GIC, consider using that instead of a money market fund. The average money fund yields about 0.02%, according to iMoneyNet. But some guaranteed income contracts yield as much as 3%, according to Dwight Asset Management.

GICs aren't backed by the government but have a good track record for safety.

Step 4: Keep your expenses low.

You invest money in the 401(k) options your employer has, not the ones you wish it had. If your employer offers only actively managed funds with high fees and still offers a match, hold your nose and contribute as much as you need to get the match. Free money is always a good thing.

If you do have a choice, however, always choose the fund with the lower fees, all things equal. For example, suppose you had an actively managed equity-income fund and an S&P 500 index fund in your 401(k) plan. The equity-income fund charges 1%, while the S&P 500 index fund charges 0.1%.

Although there are a few standout equity-income funds, most do little more than track the S&P 500. Choosing the S&P 500 fund is the better long-term choice. If you're a long-term investor, it could save you tens of thousands of dollars.

Consider two funds, each of which earns 8% a year before expenses. Fund A charges 1% a year; Fund B charges 0.1%. After 30 years, a $100,000 investment in Fund A will be worth $761,000. Fund B? $979,000 — a $218,000 difference.

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